Life insurance, the last thing on our minds

Not only is today’s economic crisis causing us to cut back on non-essentials, but as a consequence, it is also forcing us to ask how important these non-essentials are.

So where are us Brits cutting back when it comes to our monthly spend? And when it comes to some of the things we’ve been idly paying for until now, are we in danger of forgetting how essential these things actually are?

According to firstrung.co.uk, in a recent survey 42 percent of those asked said that should they be forced to cut back on one monthly payment, they would stop paying into their savings accounts. Additionally, from a survey of families carried out by creditchoices.co.uk, 37 percent would claim to reduce their savings, in a move to seemingly ignore the consequences this could have for the future.

That’s not to say that we are not also cutting back in less essential areas. In the same survey just over half of people asked said they would stop spending money on leisure activities and holidays. However, this is not only due to the fact that we have less credit due to the crunch, but also because the price of raising a family has increased at a significant rate recently – 4 percent in a year, and a full 38 percent in the last five years.

This is where the respective meanings of ‘essential’ and ‘non-essential’ seems to be getting a little foggy, for it doesn’t seem illogical to me that I would consider paying for a holiday as not essential. However at the same time, the statistic of just 52 percent of families choosing to cut back in this area suggests there is a great portion of people who would disagree with me.

Similarly, whilst I would consider life insurance to be closer to the ‘essential’ end of the payment spectrum (especially where raising a family is concerned), there are a fair amount of people who are eager to stop those payments despite the risk to future security. Interestingly, there is a significant difference between those asked in the ‘individuals’ survey discussed by firstrung.co.uk, compared to those asked in the ‘family’ survey by creditchoices.co.uk. The former survey reports that five percent would neglect their life insurance policies, whilst 23 percent are said to be reducing or cancelling life insurance in a family situation.

So is this percentage difference because of the greater need for families to cut back in more areas, or because of a gradual change in what we as a nation prioritize when it comes to spend? Essentially, do we feel more obliged to have a holiday now than we did in the past? It’s a complex question, but it seems to be a worry to some in the business who are also arguing that long-term financial security such as life insurance is more important now than it has been in the past. To those people, even the thought of cutting back in such an area does not seem sensible at all.